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What is the quick ratio, and how can it help your HVAC or plumbing business? The “Quick Ratio” measures whether your business can cover its current liabilities with the most easily liquidated portions of your assets. What does this mean? The idea here is to see if a business has enough assets that could easily be converted into cash to pay its bills. The current assets it typically includes are cash and accounts receivable. For example, if your “Quick Ratio” was 2:1, you would have twice as much cash/receivables as current liabilities. Reversely, if your ratio was 0.5:1, you would know that you don’t have enough cash to cover current liabilities. Keep in mind that this still doesn’t give a complete picture of your business, and is really giving you a first glance. You may have current liabilities that are due immediately, and you might not collect on your receivables until weeks down the road. However, this ratio is a simple and useful way to keep an eye on this aspect of your business’s financial health. By creating a graph over time, you can see trends and whether this is going in the right direction or not. While you might run into some different opinions on what would be considered a good ratio, you’ll be able to see immediately whether you can cover current obligations without taking out a loan or some other option. If graphing this ratio over time shows it moving in the wrong direction, you’ll be able to determine the correct actions to address it. And, if it’s...